Budget 2026 Update

The Income Tax Act 2025 will come in effect from 1st April 2026 as announced in Budget 2026.

The Income Tax Act 2025 was introduced in the previous budget to replace the age-old Income Tax Act 1961 in India. It consists of 536 sections over 23 chapters and 16 schedules which intend to modernise the direct tax system of the country, simplify compliance and reduce litigation. 

What is the Income Tax Act 2025?

The Income Tax Act 2025 is a comprehensive legislation governing the levy, administration, collection, and recovery of direct taxes in India. The new tax provision aims to bring an income tax reform by simplifying income tax laws. The act was passed in the parliament on 21st August 2025 and will come into effect from 1st April 2025.

New Income Tax Act 2025 PDF Download

You can download the Income Tax Act pdf that will be effective from 1st April 2026.

Key Objectives of Income Tax Act 2025

The main objectives of the Income Tax Act 2025 are as follows:

1. Simplification of Tax Laws

The provisions of the Income Tax Act 2025 focus mainly on the simplification of tax laws i.e., to make the tax laws less complex, easy to understand and much easier to interpret. Thus the overall tax filing made easier. 

2. Improving Taxpayer Experience

The provisions aim to improve the taxpayers experience by ensuring easy compliance with the rules and regulations with easy interpretation and explanations. 

3. Reduced Legal Disputes by Removing Ambiguities

With a streamlined tax administration and use of modern mechanisms for tax compliance, the Act aims to reduce legal disputes and provide for a more easier redressal system.  

4. Easier Compliance 

With a reduction in the content, the Act aim to make compliance more easier and efficient. This in turn will encourage more tax filings and reduced tax evasion. 

Major Provisions of the Income Tax Act 2025

1. Income Tax Slab Rates

Income tax slab rates under the Income Tax Act 2025 remain the same with a revised slab rates under the new tax regime as introduced in Budget 2025. 

Income Tax Slab Rate Under The New Tax Regime (Clause 202)

The new tax regime remains the default tax regime under the Income Tax Act 2025 and is covered under Clause 202. 

Income Tax Slab Rate Under The Old Tax Regime 

The old tax regime slab rates under the Income Tax Act 2025 are as follows:

2. Rebate Under The Income Tax Act 2025

Taxpayers falling under specific income limits can pay zero tax by claiming a rebate which is a tax deduction available to resident individuals. The Rebate Limit in the Income Tax Act are as follows:

3. Capital Gains Tax

The Income Tax Act 2025 retains the structure and essence of Capital Gains but the language has been made simpler. The provisions related to Capital Gains are now covered under Clause 67, 196, 197 and 198 of the Income Tax Act 2025. 

Section 47 of the Income Tax Act, 1961 has been redefined and the clauses given for the transfer of land of an industrially sick company, and stock exchange demutualisation are removed from exceptions to trannsfer.

4. Taxation of Digital Assets

The definition of Virtual Digital Asset has been broadened to include cryptocurrencies and other digital assets. The Act has removed ambiguity by classifying cryptocurrencies and other virtual digital assets as taxable income. Cryptocurrency has now been formally included as a taxable capital asset.

Income Tax Act 2025 vs Income Tax Act 1961

The following table presents the key differences between the Income Tax Act, 2025 and Income Tax Act, 1961.

What is The Effective Date of The Income Tax Act 2025?

The provisions of the Income Tax Act 2025 will come into effect from 1st April 2026. The new act will be effective on income earned in Tax Year 2026-27 and onwards. The due date to file various ITR forms is as follows:

Chapters of the new Income Tax Act 2025

The Income Tax Act has 23 chapters in total, some of which have subparts. Find them mentioned in the table below:

Features of the Income Tax Act 2025

Some of the salient features of the Income Tax Act 2025 are as follows:

• Income tax is a form of direct tax that needs to be borne by the taxpayer. It cannot be transferred to another individual. 
• The Central Government of India controls this form of taxation. 
• Broader scope of Virtual Digital Asset.
• Dispute resolution and Digital Compliance reforms.
• Relaxed Income Tax Slab Rates 
• The government levies a progressive income tax rate so that rich and economically powerful individuals have to pay taxes at higher rates. 
• Deductions apply to a maximum limit per financial year in certain cases. 

Final Word

Now that you have a clear idea of the Income Tax Act 2025, you can understand how the Income Tax Department works. Furthermore, you can take a look at the different sections in order to learn the various available deductions. This will help you make smarter investments and gain tax savings.